Want to Merge? Cigna Tells Anthem to Fork Over More Cash

Cigna (CI: NYSE) has been vocal that merging with Anthem (ANTM: NYSE) would be a good thing. Such a deal, when it happens will create a powerhouse to be reckoned with but it has rejected, and will consider to reject the $53.8 billion takeover bid as the offer does not give their shareholders the best deal possible.

In a recent letter, published in Fortune Magazine, Cigna CEO David Cordani, along with their Chairman Isaiah Harris rebuked Anthems offer to purchase their company. “We are deeply disappointed with your recent actions.” This was written after Anthem took merger and acquisition discussions public over the weekend.  “We have been engaged in good faith discussions with Anthem to determine whether a potential strategic combination is in the best interests of Cigna’s shareholders,” they added.

On Saturday, Anthem confirmed to the media that the two companies were engaged in serious talks since May but were frustrated over the progress of the talks and demands being made by Cigna. They said the company raise their offer to $184 per share after Cigna rejected three other offers. This current offer is a 35 percent premium from where Cigna closed on May 28 when the two companies began talking.

Anthem’s CEO, Joseph Swedish, says Cigna and their board want controlling interest in the new firm. These were demands Anthem would meet. Swedish and Cordani would be co-CEO of the new firm and Cigna would get 6 seats on the new 14 member board of directors. In a rebuke, he said that Cigna kept insisting that “Cordani be made CEO.” He would also oversee the transition.

Cigna is also demanding an “equal Board of Directs split.” This was not acceptable to Anthem.

Here come’s Cigna’s rebuke. “You are…facing a number of major issues, including Anthem’s lack of a growth strategy, complications relating to your membership in the Blue Cross Blue Shield Association (BCBSA) and the related antitrust actions, and other significant challenges, such as the massive data breach you experienced in February,” Cordani and Harris wrote.

The letter goes on to say that Anthem has the “inability” to address certain core issues which caused their management team to terminate prior discussions earlier in the calendar year. With both sides hostile at this point. It comes down to the shareholders. Cigna’s shareholders are going to find it difficult to turn down $184 per share. This is an attractive offer that should make them happy.

Anthem will not offer much more, in the way of money to take over Cigna. In the meantime, Cigna can up the stakes and make a bid for Humana (HUM: NYSE) but there will be a lot of pressure to get this deal done from both companies’ shareholders.

Right now Humana is in talks to be taken over by Aetna.